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It may affect your life now, but the state of the U.S. economy has a huge impact on the rest of the planet, does it not? If everything's going to hell here, you may have trouble in the future too. I hope things get better soon, because this really is scary. I don't think we're headed for another 1930s-esque depression, but the current situation has me worried.

no need, the numbers may not look pretty, but the effect of tougher standads in the economy will pull us out of this subprime mess.

no need, the numbers may not look pretty, but the effect of tougher standads in the economy will pull us out of this subprime mess.

What tougher standards? Right now, every central bank and finance officer is either too stunned or too busy fighting fires to think of longer-term solutions.

Quote:

Originally Posted by FLCL

Its insane to think banks were giving out money without anything in return, they honestly deserve this.

It wouldn't have been a problem if the US property bubble hadn't burst. Ironically, it wouldn't have exploded if someone hadn't studied the numbers too closely, and just went with the flow. When times are good, it's very hard to argue against the "logic" of achieving massive returns on equity (and thus higher bonuses) through ever-higher leverage.

What we had, was a US system that encouraged financial institutions to take ever-increasing risks, without sufficient due diligence. No one checked whether all that easy credit was being translated into productivity gain. There is a fondness, nowadays, for developed economies to rely heavily on monetary policy to fix these crises, ie, by setting interest rates to control the supply of money.

But merely controlling the money supply doesn't fix an economy's problem in the long run. Ultimately, an economy is about trading goods and services. If all the extra money generated by securitisation isn't being used to grow the pie, America's problem won't be fixed. Same goes for any developed economy that follows similar strategies.

I'm more worried about Hank Paulson's promise to roll out the cash, to the tune of hundreds of billions of dollars, at a time where the US dollar may become worthless. Must the world continue to foot the bill?

just wondering what everyone's opinion on the feds response to this whole mess this year?

other then the bear stern bailout i really can't fault how Paulson and Bernanke on how they handle all this crap. I see a lot of critisms on both these guys but i haven't heard of anyone offer a better solution.

As I understand the US Federal Reserve is not really government, it has representatives of the US Government on it's board, but the money under it's control is capital contributed by private banks. So this whole "the US government is bailing the banks out with taxpayer money" we're getting at this end of the world isn't right.

As I understand the US Federal Reserve is not really government, it has representatives of the US Government on it's board, but the money under it's control is capital contributed by private banks. So this whole "the US government is bailing the banks out with taxpayer money" we're getting at this end of the world isn't right.

Anyone feel free to correct me if I'm wrong.

The Treasury Dept. is borrowing money from the Reserve to bail out the companies. That money has to be repaid sooner or later. That means taxpayers will have to pay the bill.

just wondering what everyone's opinion on the feds response to this whole mess this year?

other then the bear stern bailout i really can't fault how Paulson and Bernanke on how they handle all this crap. I see a lot of critisms on both these guys but i haven't heard of anyone offer a better solution.

I applaud it. This is what I wanted to hear and see, not candidates offering economic plans that may or may not happen sometime next year. This is the kind of action we need now, and the steps are pretty dramatic.

I do see people complaining about it, but it's something like having a cut. Would you rather pour alcohol on it to clean it and have it sting like crazy, or wait until the cut is infected and really starts to hurt?

The speech reminded me a bit of a tabula rasa approach (the government is basically spend a lot of reserve money to eat the debts), but no matter what the taxpayer is taking a hit. I'd rather it be as a result of the path to getting this mess fixed than it be because the financial system is collapsing.

I applaud it. This is what I wanted to hear and see, not candidates offering economic plans that may or may not happen sometime next year. This is the kind of action we need now, and the steps are pretty dramatic.

I do see people complaining about it, but it's something like having a cut. Would you rather pour alcohol on it to clean it and have it sting like crazy, or wait until the cut is infected and really starts to hurt?

The speech reminded me a bit of a tabula rasa approach (the government is basically spend a lot of reserve money to eat the debts), but no matter what the taxpayer is taking a hit. I'd rather it be as a result of the path to getting this mess fixed than it be because the financial system is collapsing.

Er... the rest of the world has been funding the US deficit for years now. Treasury bonds are held by China and Japan, among others, to the tune of trillions of dollars. It's not just the US taxpayer. The rest of the world will have to foot part of the bill eventually, just as they have for at least the last 10 years.

Er... the rest of the world has been funding the US deficit for years now. Treasury bonds are held by China and Japan, among others, to the tune of trillions of dollars. It's not just the US taxpayer. The rest of the world will have to foot part of the bill eventually, just as they have for at least the last 10 years.

An unelected financial elite is now entrusted with the assignment of getting us out of a disaster into which an unelected financial elite plunged the nation.
We are just spectators.

What the Greatest Generation handed down to us — the richest, most powerful, most self-sufficient republic in history, with the highest standard of living any nation had ever achieved — the baby boomers, oblivious and self-indulgent to the end, have frittered away.

Last 2 paragraphs of Buchanan's essay. I wouldn't change a word of it. Very well written and said.

What the Greatest Generation handed down to us — the richest, most powerful, most self-sufficient republic in history, with the highest standard of living any nation had ever achieved — the baby boomers, oblivious and self-indulgent to the end, have frittered away.

Last 2 paragraphs of Buchanan's essay. I wouldn't change a word of it. Very well written and said.

(this Post isn't really directed at you mg1942, it is more of a partial rant at ol'Pat.)

Oh Pat, you have some to teach us, but still so much to learn.

The Baby Boomer generation, easily the most self-indulgent American generation, are not the perpetrators of this long time coming economic failure. This article is blaming the victim but not the "criminal".

It was the "Greatest Generation" that removed our currency from the gold standard and helped to create the Federal Reserve that has so foolishly squandered our resources. Added to that, it wasn't until the early 1990s that Baby Boomers even attained enough power to shift our economy in other directions, before that, the globalization of our economy was lead by David Rockefeller and other like minded businessmen. What about the Korean and more importantly the Vietnam war and all the other bloodshed in the name of democracy against unknown and ultimately sometimes none existing threats (I am still trying to figure out why the "Greatest Generation" destroyed South America, let alone the Middle East), that led to hundreds of billions being spent for absolutely no reason. What about the long running failed energy policies? or even Nafta? All enacted by the "Greatest Generation". Who controlled Wall Street? The Educational System? Who created "unlimited credit"? Need I say more, cause there is still much more to say.

Pat, you really need to learn that simply because something happened recently, does not necessarily make it the fault of the younger generation. The vast majority of our leaders for the past 60 years have been members of the "Greatest Generation", and you shifting the blame to the preceding generation is very low, and even a little sickening (though, I will admit that the Baby Boomers are at fault for being to self-indulgent, and, of course, not voting the various scum out of office when they could have). We are all partially responsible for this crisis, of that you are correct, but do not forget who gladly and willingly led us down this avenue.

edit: Now having read the full article (and not just the two supplied paragraphs, let me say that many of the things he listed as being bad are in fact very good (such as globalization or borrowing and lending or realistically much that he claims is bad is in fact fairly good but needs to be properly regulated, something that he opposes for the stupidest reasons, as this economic crisis has shown us yet again), so please take Pat's words of advice with a grain of salt (is that the expression?).

edit: To add insult to injury, here is a fun article that Solomon posted on the Election board that helps to explain the current crisis: Who is the Blame?

I have mixed opinions about the Patrick Buchanan article quoted above.

He's right in that, for years, "Americans have spent more than we earned. We save nothing. Credit card debt, consumer debt, auto debt, mortgage debt, corporate debt — all are at record levels".

However, I don't agree with his opinion that globalisation is to blame. He wrote: "Up through World War II, we followed the Hamiltonian idea that America must remain economically independent of the world in order to remain politically independent.

But this generation decided that was yesterday’s bromide and we must march bravely forward into a Global Economy, where we all depend on one another. American companies morphed into 'global companies' and moved plants and factories to Mexico, Asia, China and India, and we began buying more cheaply from abroad what we used to make at home: shoes, clothes, bikes, cars, radios, TVs, planes, computers."

It seems that Mr Buchanan doesn't understand how globalisation works. Those American jobs would have been lost to Mexico, China and India anyway, regardless whether American companies "went global". Globalisation is nothing more than Adam Smith's idea for producers to specialise in their respective areas of competitive advantage, written large on a global scale. Even as the United States began hiving off the industries that it is no longer competitive in, it began to develop new competencies in areas that other countries cannot yet match, for example, advanced computing and entertainment.

The trade deficit that Mr Buchanan complains about is, at heart, caused by two factors. First, and more importantly, by the difficulty of converting redundant baby-boomer workers into other jobs once their industry went bust. I blame this on unionism, especially in the car industry. It's quite simple: American cars simply aren't as competitve in global markets as Japanese or European cars, that's why less are being sold. Greater innovation was required, but that could mean more redundancies, hence the unions stepped in and prevented it.

Second, the trade deficit, like almost every other deficit in the United States, has been funded by easy credit, the same factor that caused the sub-prime mess we're witnessing today. The simple fact is that Americans have grown used to spending beyond their means. The consumption had to go somewhere, and in this case, it was on imported goods, hence the trade deficit.

The idea that the United States must isolate itself from the world to retain its clout is dangerously wrong today, both for itself and for the world economy. The flow of goods and services has gone massively global since the 1990s, and this trend is not going to turn back.

The most fundamental fix for any country that "suffers" under globalisation is to address its economic productivity, through education and infrastructure development. Then, it has to ensure relatively free movement of labour, including foreign labour, to whichever industry needs it most. It has to allow competition at home, and through that competition each company becomes sharper, leaner and more innovative. And when critical mass has finally been achieved, the industry as a whole is ready to take on the world.

No, I don't see any solutions in Mr Buchanan's suggestions. I see more danger instead. A better model for the United States would probably be Japan.

Quote:

First, a reminder of how bad things looked in 2002. At that point it seemed almost inevitable that one of the huge Japanese banks would find itself insolvent. It became clear that they had a severe problem with bad debt — money that they had lent to companies and individuals who could not repay it.

During a property market boom, the banks were happy to lend to builders and developers, especially those who were putting money into offices and shops in big cities like Tokyo. Then property prices tumbled and the developers could not repay their loans. Banks were losing money in loans to people who could not repay them and whose collateral, the value of their property, was less than the value of those loans.

The Japanese authorities agonised over what to do. They slashed interest rates to zero. They pumped money into the financial system, just as America has. But in the end, they took the expensive and painful decision to use tax payers' money to help the banks write off the bad loans.

At least US$100bn dollars went on the programme. The Bank of Japan lent money to institutions at special rates and also bought some of their shares. The money came with an important proviso; the Bank of Japan wanted full disclosure of how serious the problem was and a promise from the banks not to let it happen again.

The article, unfortunately, doesn't go further into examining how Japanese banks "would not let it happen again". But, I'll assume that it involves greater fiscal discipline. It's certainly true that, for now, Asian banks including Japan's have been barely affected by Wall Street's meltdown. That's mainly because the exposure has been very minimal. Asian banks, in general, have always been very conservative vis-a-vis American and European banks.

During the boom years, Asian banks were criticised for not making better use of their shareholders' money. Well, look who has the last laugh now.